Franklin Templeton Fund Adviser, LLC Announces Distributions for Certain Closed End Funds Pursuant to their Managed Distribution Policy for the Months of March, April and May 2024
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Insights
The announcement by Franklin Templeton Fund Adviser, LLC regarding the managed distribution policy for certain closed-end funds directly impacts investors who seek regular income from these funds. The consistency in the distribution amounts for the months of March, April and May 2024, as indicated for the funds BWG, SCD and EMD, suggests a stable cash flow for shareholders. However, the composition of these distributions is critical. For instance, BWG and EMD are paying distributions largely from income, while SCD is significantly returning capital.
Investors should note that a high return of capital percentage, such as the 69% for SCD, may indicate that the fund is not generating enough income from its investments and is instead returning investors' principal. This could potentially erode the fund's asset base over time if it continues. In contrast, EMD's 100% income source for distributions is a positive sign of the fund's income-generating capabilities. It's also worth noting that a return of capital is not indicative of a fund's overall performance and should not be mistaken for yield or income.
Any changes in the managed distribution policy could influence the market price of the funds' shares. Hence, it is important to monitor announcements from the Board of Directors regarding policy modifications, terminations, or suspensions. Such changes could signal a shift in the fund's income-generating ability or a strategic realignment of distribution methods, which could impact investor sentiment and fund valuation.
From a taxation perspective, the nature of distributions is an essential consideration for shareholders. The breakdown between income, short-term capital gains, long-term capital gains and return of capital has different tax implications. For example, income and short-term capital gains are typically taxed at a higher rate compared to long-term capital gains.
It's important to highlight that return of capital is not taxed immediately but reduces the shareholder's cost basis in the investment, potentially resulting in higher capital gains when the shares are sold. For funds like SCD, where a large portion of the distribution is a return of capital, shareholders should be aware of the potential tax consequences down the line. Additionally, currency fluctuations factored into the funds' tax accounting records could complicate the tax situation for shareholders who are required to report foreign income.
Investors should consult with a tax professional to understand the specific tax treatment of these distributions and to plan accordingly. The separate notice provided to shareholders when distributions are paid will be an important document for tax reporting purposes.
The managed distribution policy of closed-end funds like those managed by Franklin Templeton is a critical factor for market researchers analyzing the investment attractiveness of such funds. The policy's aim to maintain a consistent distribution level can be appealing to income-focused investors, especially in a low-interest-rate environment. However, the sustainability of these distributions is contingent upon the funds' underlying portfolio performance.
Market trends and economic conditions that affect the performance of the assets within the funds' portfolios could eventually impact the ability to maintain these distributions without eroding capital. For example, the global income opportunities presented by BWG require monitoring global economic indicators and interest rate trends, as these will influence the income generated by the fund's investments. Similarly, the performance of SCD and EMD will be tied to their respective market sectors and the broader economic landscape.
Understanding the source of the funds' distributions, as well as the potential for modification of the distribution policy, is essential for market research analysts forecasting the funds' performance and advising investors on the stability and risk associated with these investment products.
The following dates apply to the distribution schedule below:
Month |
Record Date |
Ex-Dividend Date |
Payable Date |
March |
3/21/2024 |
3/20/2024 |
4/1/2024 |
April |
4/23/2024 |
4/22/2024 |
5/1/2024 |
May |
5/23/2024 |
5/22/2024 |
6/3/2024 |
Ticker |
Fund Name |
Month |
Amount |
Change from
|
BWG |
BrandywineGLOBAL - Global Income Opportunities Fund Inc. (a) |
March |
|
- |
|
April |
|
|
|
|
May |
|
|
|
SCD |
LMP Capital and Income Fund Inc.(a) |
March |
|
- |
April |
|
|
||
May |
|
|
||
EMD |
Western Asset Emerging Markets Debt Fund Inc. (a) |
March |
|
- |
April |
|
|||
May |
|
(a) Please see table below for each Fund’s estimated source of distributions.
Under the terms of each Fund’s managed distribution policy, each Fund seeks to maintain a consistent distribution level derived from the income and capital gains generated from the Fund’s investment portfolio. To the extent that sufficient distributable income is not available on a monthly basis, each Fund will distribute long-term capital gains and/or return of capital in order to maintain its managed distribution rate. A return of capital may occur, for example, when some or all of the money that was invested in the Fund is paid back to shareholders. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income”. Even though the Fund may realize current year capital gains, such gains may be offset, in whole or in part, by the Fund’s capital loss carryovers from prior years. The Board of Directors may modify, terminate or suspend the managed distribution policy at any time. Any such modification, termination or suspension could have an adverse effect on the market price of the Fund’s shares.
Based on the Funds’ tax accounting records, which also factor in currency fluctuations, each Fund’s estimated source of cumulative fiscal year-to-date distributions is presented in the table below:
Fund |
Fiscal
|
Income |
Short-Term
|
Long-Term
|
Return of
|
|
BWG |
Oct 31 |
|
- |
- |
|
(a) |
SCD |
Nov 30 |
|
- |
- |
|
(a) |
EMD |
Dec 31 |
|
- |
- |
- |
(a) |
(a) Sources of cumulative fiscal year-to-date distributions are estimated through May 31, 2024.
The updated estimated components of the distributions announced today will be provided to shareholders of record in a separate notice when the distributions are paid.
Shareholders should not draw any conclusions about each Fund’s investment performance from the amount of these distributions or from the terms of each Fund’s managed distribution policy. The amounts and sources of each Fund’s distributions to be reported will be estimates and will not be provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon each Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. Each Fund will send a Form 1099-DIV to shareholders for the calendar year that will describe how to report the Fund’s distributions for federal income tax purposes.
Franklin Templeton Fund Adviser, LLC (formerly known as Legg Mason Partners Fund Advisor, LLC) is an indirect, wholly-owned subsidiary of Franklin Resources, Inc. (“Franklin Resources”).
For more information about the Funds, please call 1-888-777-0102 or consult the Funds’ website at www.franklintempleton.com/investments/options/closed-end-funds. Hard copies of the Funds’ complete audited financial statements are available free of charge upon request.
Data and commentary provided in this press release are for informational purposes only. Franklin Resources and its affiliates do not engage in selling shares of the Funds.
The Funds’ common shares are traded on the New York Stock Exchange. Similar to stocks, Fund share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value, and can increase an investor’s risk of loss. All investments are subject to risk, including the risk of loss.
INVESTMENT PRODUCTS: NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
Category: Distribution Related
Source: Franklin Resources, Inc.
Source: Legg Mason Closed End Funds
View source version on businesswire.com: https://www.businesswire.com/news/home/20240220560104/en/
Investor Contact: Fund Investor Services 1-888-777-0102
Source: Franklin Resources, Inc. and Legg Mason Closed End Funds
FAQ
What are the distribution dates for BWG in March, April, and May 2024?
What is the managed distribution policy for the funds mentioned in the PR?
What are the estimated sources of cumulative fiscal year-to-date distributions for BWG, SCD, and EMD?
